Government Policies to Push IP-based Communications

Last week the FCC in the US publicized a proceeding to solicit questions on the content of a forthcoming NOI (notice of inquiry) on VoIP and IP communications. In effect they are asking the public to tell them what questions they ought to be asking.

"...appropriate policy framework to facilitate and respond to the market-led transition in technology and services, from the circuit switched PSTN system to an IP-based communications world."

This first quote from the short (3 page) document seems appropriate. They recognize that communications is increasingly occurring on packet-switched networks, and they are concerned that their policies and regulations may hinder this market-driven change. So far so good.

"...we seek to understand which policies and regulatory structures may facilitate, and which may hinder, the efficient migration to an all IP world."

This second quote is very similar in tone to the first, but with the addition of a desire to get into details. This is also very fair and so quite reasonable. I believe that the real, underlying problems are not so straight-forward, and I expect that this will muddle the long process of public engagement they are beginning. One important reason for this is that while the public is being invited to respond, as usual in these matters it will be the industry players, especially the largest incumbent corporations, with the greatest budgets and motivation to participate.

This is not to say the FCC will not try to be fair. I have dealt with the FCC in the past and they are for the most part eager and able to do good work. They will nevertheless find it difficult to achieve a fair outcome. To see this we need only go back in time to earlier initiatives, such as, for example, the attempt to achieve equitable competition in the local telephony market with the 1996 Telecommunications Act.

Look around now and you'll see that after nearly 14 years we have a largely reconstituted oligopoly of massive telcos with mostly tiny hosts of niche competitors. The only competition with any heft are the cable companies, but they didn't need at least 95% of what the Telecom Act engendered to be successful. It was enough that they were permitted to enter the telephone market and able to secure interconnection with other phone companies. Almost everything else in the Act was about unbundling and securing access to the equipment and facilities of the telcos. With their own facilities-based networks, the cable companies didn't need this; what took them time to get into the market was the encumbrance of a more mundane nature: upgrading their technology and the will to enter the market.

In that light I have to wonder what this FCC proceeding can realistically accomplish? VoIP certainly already exists as both a technology and as a basis for driving down the prices for telephone service by means of regulatory arbitrage, through utilizing the broadband and (more recently) wireless consumer services provided by the incumbents. Will the FCC dismantle the existing plethora of bizarre rules for inter-carrier settlements and fees for user-funded services like 911 and the Universal Service Fund boondoggle? A lot of these persist for political reasons to support high-cost rural areas but are often misused and are poor at achieving the intended results.

I have come to strongly believe that no regulations that seek to micro-manage the business operations of corporations can succeed, and will only end up creating unintended consequences by distorting the normal operation of the free market. Regrettably, facilities-based competition is the only effective solution; it's regrettable because it is expensive and takes a long time to flower. With effective competition, there is no need to come up with regulations about IP communications: let the market decide on the best technological solutions and services to serve and grow the market since the public will have a real choice.

What the FCC should be doing is fine-tuning its regulations so that the major facilities-based telecommunications providers -- telcos, cable companies, mobile wireless and fixed wireless -- have a reasonably equal shot at success. If they can do that, they will have a far better chance of not only meeting their objectives but also re-energize this important and critical industry sector.

If you'll excuse one note of what I believe is justified cynicism, I am not focused on the US because it is an important and nearby market (which it is), but rather because what they do will be implemented in some fashion here in Canada about 3 years later. Only then will Canadians see effective telecommunications competition and some real choice. So let's cheer on the FCC!